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How The Presidential Election Impacts Home Affordability

Posted By Paula Henry on Tuesday, November 04, 2008 5:22:00 AM | 4 Comments

More than a handful would-be Indianapolis home buyers stayed on the sidelines this year, waiting for Election Day to pass. The prevailing thought was that once the new President-Elect was identified, credit markets will systemically unfreeze and housing markets will return to normal. If history is a guide, this is an unlikely scenario.

Election Day doesn't figure to alter markets any more in 2008 than it did after the four previous presidential elections. If anything, post-Election Day market reaction has been muted:

1992 : Dow closes down 0.9 percent the day after Election Day
1996 : Dow closes up 1.6 percent the day after Election Day
2000 : Dow closes down 0.4 percent the day after Election Day
2004 : Dow closes up 1.0 percent the day after Election Day

But just because the stock market has a history of idling on the day after the election doesn't mean that mortgage rates will rest easy this week. The likely outcome is the opposite, actually.

If investors believe the President-elect will successfully stimulate the economy, stock markets would likely rally, causing mortgage bonds to sell off and mortgage rates to rise. Higher mortgage rates means higher monthly payments on a home. Or, if investors think the winning candidate will fail to revive the economy, money would flock to government bonds as a place of safety.

This dollar flow would occur at the expense of the mortgage market, causing rates to rise in this scenario, too. Again, higher home payments. Of course, it's as difficult to predict post-Election market conditions as it is to predict the election itself but one thing is for certain -- rates may rise and fall before the week is out, but credit guidelines will remain extra-tight. Getting approved for a mortgage won't be any easier -- no matter which party wins the Presidential Election.

Source Will the election drive the Dow? Eamon Javers Politico https://news.yahoo.com/s/politico/20081022/pl_politico/14826

Discussion

#1 Posted by Andalucia Property at 11/7/2008 5:30 AM

Nobody can really predict what would happen next. I guess home affordability will be affected by a great deal only if the new government won't fail to address the problem.

#2 Posted by Dylan Darling at 11/6/2008 6:53 AM

Only time will tell if the new president will have an impact on the housing market. Though, most experts realize that rates are going to keep rising. Now may be the time for many buyers sitting on the fence to buy.

#3 Posted by James Boyer Morristown NJ at 11/11/2008 0:38 PM

I am hoping that people will start to be a little more possitive and realize what great deals there are on homes. I fully expect that over the coming years we are going to see lots more inflation than we have been used to, considering how much money the US government is printing to deal with all these problems. What is the best thing to have during times of high inflation? A good fixed rate mortgage!!!

#4 Posted by Ki in Austin at 11/9/2008 6:45 AM

That stinks. I was really hoping 30 year rates would hit 5.5 or so. I kind of agree that most likely though rates will go up. The fed cant cut rates anymore as well so their ability to influence rates downward is limited.